Cloud computing has the potential to reshape IT provision over the coming decade. The concept of renting applications, development platforms, processing power, storage or any other web-enabled service marks a sea change in the approach to enterprise IT. It is an approach that places the internet at the heart of the organisation.

But despite blockbuster-levels of hype, there is still a marked degree of confusion over cloud computing, not least over what it actually entails. There are multiple ­ and sometimes contradictory ­ definitions used to describe cloud computing. These encompass everything from defining it as an updated version of utility computing to categorising the cloud as anything consumed outside the corporate firewall, which could even include conventional outsourcing arrangements.

IT advisory group Gartner defines cloud computing as a style of computing in which massively scalable IT-enabled capabilities are delivered as a service to multiple customers using internet technologies. And although the hype surrounding cloud computing is off the scale, it has the potential to provide businesses with a compelling alternative model of IT delivery, says Joe Skorupa, research vice president at Gartner.

“The promise of cloud computing is ubiquitous access to a broad set of applications and services, which are delivered over the internet and related networks to multiple customers,” he says. “Cloud exists when someone takes responsibility for the delivery of a service or a resource over the internet. And the cloud isn’t just about the big guys ­ it could be a small guy using the big guy’s cloud to deliver their own applications.”

Although the term cloud computing is comparatively new, many of the underlying technologies ­ from web acceleration to virtualisation ­ are relatively mature and increasingly battle-hardened. How these components are assembled into a business-ready service and which approaches will emerge successfully is less clear.

To date, cloud pace-setters such as Amazon, Google, Yahoo and Microsoft have taken the concepts of grid and utility computing, virtualisation and next-generation datacentres to be the cornerstones of delivering cloud services. Examples such as Amazon’s Simple Storage Service (S3) or Google’s Apps service provide a glimpse of what cloud computing may look like, but neither has yet achieved the degree of reliability to be considered enterprise-ready.

Back to basics

Nevertheless, these pioneers provide a window to a new world of computing, says Vuk Trifkovic, senior analyst at Datamonitor. He believes that cloud computing could make IBM’s much-ridiculed 1943 prediction that the world may only need five computers seem surprisingly prescient. “Look at Microsoft, Oracle, Google ­ every company with aspirations for cloud computing is now significantly bulking up its datacentre,” he says. “Cloud computing isn’t going to have one shape or form, but will offer different levels of service depending on customer needs.”

While there is a lot of marketing hype around cloud computing, Bill Sexton, chief information officer (CIO) at British Gas Services, is adamant this is not just another fad.

“I predict that within five years the way we run our corporate IT will be significantly different,” he says. “In the future it will not matter where the software lives, and in my view if you still have it on site you’ll be throwing money away because you’ll be putting half of your resources into supporting the infrastructure. It’s not the infrastructure that matters ­ it’s the applications.”

Hosting is a core requirement of the cloud computing model. This is not a new idea, but its significance is that it removes the overhead typically associated with managing IT infrastructure.

Four years ago when Justoffbase, an internet supplier of engineering tools and equipment, realised that its enterprise resource planning (ERP) applications were approaching the end of their life, it scoured the market for replacement systems. As Tim James-Parker, a partner at the company, explains, the logical solution for the business was to look for a hosted internet-based application. It opted for NetSuite.

“We use this application like you would use an online bank account,” he says. “NetSuite handles all the maintenance, guaranteeing uptime and the use of the latest technology. I also took the view that NetSuite was probably better at looking after our data than we were, because it’s their business. Also when you have thousands of users sharing the same service, if there is ever a problem it will be sorted out fast.”

As well as removing some of the day-to-day IT operation away from the company, Justoffbase also experienced an immediate 30 per cent increase in business following the move to NetSuite. James-Parker attributes this to the automating of routine processes and integrating company-wide operations.

While the introduction of cloud computing can remove some of the difficulties associated with owning and operating all aspects of IT, it introduces new problems for CIOs to consider. While the public internet is the simplest choice for delivering cloud-based services it lacks end-to-end quality of service (QoS) and is subject to routing whims and variable levels of performance.

Some of these disadvantages can be overcome by the use of optimised internet overlay or web-accelerant technologies, such as Citrix NetScaler or F5’s WebAccelerator, in the cloud provider’s datacentre. However, the optimised internet overlay technology will add significantly to the cost and may make it more difficult for organisations to move between cloud providers. Nevertheless, for business-critical applications ­ where consistent response time and high availability are required ­ it will be essential.

QoS is set to become a defining metric for cloud-based suppliers, predicts Gartner. By 2013, cloud QoS guarantees will be the primary decision criteria for 90 per cent of services used by IT organisations, says the analyst.

And QoS concerns are likely to mean that cloud computing is adopted more readily by smaller businesses ­ where agility is highly prized ­ than by larger, more cautious enterprises and where legacy systems are more deeply entrenched.

“British Gas Services has a lot of intellectual property tied up in legacy processes and systems, and therefore assets, so we will not be switching overnight,” says Sexton. “However, speed to market is also important and having a solution ready to switch on in four months rather than the 12 months it would take for a traditional solution is compelling. The cost profile is also different, with no large capital outlay.”

XChange Business, a currency trader with 220 high street bureau de change franchises, has adopted a hosted, grid-based system from Corporate Modelling. The system is built on a Microsoft architecture. The initial investment was less than a fifth of a conventional in-house system, says Norman Mitchell, the company’s IT director.

Understandably, he is delighted. “It provides us with everything we were looking for ­ cloud computing is the right technology for us. The system is resilient, looked after and it’s a brilliant service for the amount of money we pay,” he says.